Reducing the Costs of Higher Ed

We’ll be headed to Harrisburg tomorrow for the Association of Independent Colleges and Universities of Pennsylvania (AICUP) Student Aid Advocacy Day. Please follow our live posts on Twitter (@CSC_Cubed)! We’re asking for more aid for middle income students – here’s our advocacy letter:

John Carey, the Chancellor of the Ohio Department of Higher Education, has written a guest column outlining the steps that the Buckeye State has taken to make college more affordable.

Ohio has increased spending on higher education by 8.5% and frozen tuition and fees at state supported schools for two years. Additional money has been appropriated to help underprivileged and under-represented students pay for tuition at community and four year colleges.

One of the biggest sources of increased debt for college students is not graduating on time. Ohio has tried to address this by devoting resources to helping students get college credit in high school and to creating guidelines for more skilled counselors to keep students on track for a four year graduation once they are in college.

The Federal government has released new data on American colleges in an effort to help students choose where they want to study. According to Inside Higher Education

These new data show publicly, for the first time, the share of a college’s former students who make some progress in paying down their federal loans within the first three years after leaving college. And they provide the first comprehensive look at how much students who receive federal loans and Pell Grants end up earning after they leave a specific college, both in the short term and long term.

Recently President Obama announced a plan to end the tax breaks associated with popular 529 college savings plans. According to the New York Times

The idea was to end one tax break…and plow that billion-dollar savings over 10 years into a far larger expansion of another tuition tax credit aimed more squarely at the middle class.

However, President Obama came under fire from House Speaker John Boehner, former Speaker Pelosi, states and other politicians for ending what is perceived as a middle class tax break.

The opposition has caused President Obama to drop the idea. According to a White House spokesperson

“Given it has become such a distraction, we’re not going to ask Congress to pass the 529 provision so that they can instead focus on delivering a larger package of education tax relief that has bipartisan support, as well as the president’s broader package of tax relief for child care and working families”

The costs of tuition and fees to attend college have been rapidly increasing for years, even decades, but this increase may be slowing according to data from recent years. This news comes as a relief to students and families who are struggling to find ways to make the investment in paying for a college education. However, even though the increase in sticker price to attend college is slowing, there is a rise in what students are actually paying when you subtract the financial aid they receive.

Although even in the most recent years tuition and fees are still going up from year to year, the rise is much smaller than in the growth in past years. Both public and private four-year institutions have seen the effects of the slow in the rise of the sticker price to attend in the past year because they have both seen the smallest one-year percentage increase of the tuition and fees in decades. However, the net prices of what students and families actually pay to attend college minus all of the forms of financial aid they receive have been increasing more and more in recent years because the growth in financial aid has not been keeping up with the increase in tuition prices.

The average net price that students and families paid was actually much lower at the height of the recession than it is now when some families are still trying to recover from the recession because there is no longer a rapid increase, but a decline in the amount of grant aid supplied by states and the federal government while tuition and fees prices are still going up each year. Some families are able to pay for a postsecondary education with no problem, but many students and families nowadays rely on subsides to pay for a college education. Although financial aid is obviously still present, it is no longer increasing by any substantial amount like it was in previous years during the recession.

Pushing for more financial aid from the states and federal government may not be the answer though, because it will only temporarily bail families out since the net prices of colleges are still likely to increase from year to year. The real problem that needs to be addressed is for college leaders and policymakers to evaluate what it really costs to supply a college education, and how to overall sticker price, therefore lowering the net price for students and families.

Oregon proposed a program that would allow students to attend state colleges tuition free. This proposal, called the “Pay It Forward, Pay It Back” program would have students go through their higher education without the stress of taking out loans and racking up a lot of interest and massive debt. They would do this by paying the state back a small portion of their income over the course of about 20 to 25 years. After graduating, the student would pay 0.75% of their yearly income per year of schooling. This means a 4 year student would end up paying 3% interest for the time that they are paying. This interest would be put into a trust fund that would help other students in the future.

There are some problems with this proposed plan. One problem is the massive cost that the states would have to pay to start this program. Washington looked into the feasibility of this plan for their state and determined that it could cost as much as 1.4 billion dollars a year. Also, because the payment plan is based on the income of the students after they graduate, it may drive the top students away from state schools if they believe that a portion of their possibly higher income will be taken away from them over the next 20-25 years.

Although this plan is not perfect, it may be a step in the right direction to help students pay for their education without amassing a large amount of debt.